Skip to content
MarkSchemeMarkScheme
Sign up — no card

9609 · 7.1.1

The relationship between business objectives and organisational structure — practice questions

Practice and worked examples for 9609 The relationship between business objectives and organisational structure. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

Multinational adopts strategy of local product adaptation in each country but retains all marketing decisions at global HQ. Analyse the structure–objective fit.

Show solution outline

Objective: Local adaptation needs fast local decisions on pricing, promotion, packaging.

Structure problem: Centralised marketing creates delays and generic campaigns — misalignment.

Consequences: Lost market share, demotivated country managers (2.2), competitor wins with local offers.

Fix: Decentralise marketing to regional divisions (7.1.5) with global brand guidelines only — matrix or divisional structure.

Worked example 2

Precision Engineering Ltd aims to reduce its annual operating costs by 5% to remain competitive. The current structure includes a layer of 8 regional managers, each earning an average salary of $70,000 per year. The board is considering delayering by removing this entire management level. The estimated one-off redundancy cost per manager is $50,000. The company's current annual operating costs are $11,200,000. Calculate the annual cost saving from delayering and evaluate if this structural change will meet the company's objective in its first year.

Show solution outline

Objective: Reduce annual operating costs by 5%. Target Cost Reduction: 5% of 11,200,000=11,200,000 = 560,000.

Step 1: Calculate total annual salary savings. This is the recurring saving from removing the management layer.

  • Calculation: 8 managers × $70,000/manager
  • **Annual Salary Savings = 560,000∗∗560,000**

Step 2: Calculate total one-off redundancy costs. This is the initial cost of implementing the delayering.

  • Calculation: 8 managers × $50,000/manager
  • **Total Redundancy Cost = 400,000∗∗400,000**

Step 3: Calculate the net cost saving in Year 1. This figure accounts for both the savings and the initial costs.

  • Calculation: Annual Salary Savings - Total Redundancy Cost
  • 560,000−560,000 - 400,000
  • **Net Saving (Year 1) = 160,000∗∗160,000**

Step 4: Evaluate against the objective.

  • The target saving was 560,000.560,000.
  • The actual net saving in Year 1 is 160,000.160,000.
  • Conclusion: The delayering strategy will not meet the 5% cost reduction objective in its first year (160,000<160,000 < 560,000). However, from Year 2 onwards, the full annual saving of $560,000 will be achieved, meeting the objective. The decision depends on the urgency and time frame for the cost reduction. The payback period for the redundancy cost is $400,000 / $560,000 = 0.71 years (approx. 8.5 months).
Mark a 9609 question on this topicFull lessonOpen in course studio